Is Chinese automotive FDI in Mexico a real threat to the US?

Résumé:

The objective of this paper is to analyze the outflow of Foreign Direct Investment (FDI) from China into the automotive industry in Mexico. Currently, there are more than fifty automotive manufacturing companies in Mexico, most of which are involved in parts and components, excluding BYD, whose status is still pending, and some infrastructure projects. However, little is known about what these companies are producing, what supply chains are involved, and the labor characteristics within them, such as wages, union presence, and the type of union involved.
Apart from the work done by the ALC-China Network (2024), this information gap largely exists because most academic analyses of foreign investment in Mexico have overlooked the role of Chinese companies in the automotive sector. According to official data, Chinese investment in Mexico’s automotive industry accounted for just 0.24% of total automotive FDI in 2015, increasing slightly to 1.68% by 2023 (xxx). Additionally, 23 infrastructure projects are related to transportation, including significant sales of buses to governments in several cities.
In contrast to the lack of information and analysis, there is often exaggeration of the perceived threat posed by Chinese companies entering Mexico, particularly in the context of electric vehicle assembly for export to the United States under the tax exemptions provided by the USMCA (Fortune, 2024).
In response to the tension between the information gap and geopolitical concerns involving China, the United States, and Mexico, our study aims to: (1) understand the main characteristics of Chinese companies in Mexico's automotive sector, particularly in terms of production, investment, employment, and labor conditions; (2) examine key features of Chinese-origin transportation infrastructure projects; and (3) discuss the impact of Chinese FDI on the electrification of Mexico's automotive sector in light of the recent potential increase in U.S. tariffs.
The methodology consists of three stages: first, analyzing secondary data sources; second, tracking Chinese companies established in Mexico using DENUE-INEGI and other documentary sources; and third, assessing labor conditions through a review of collective labor agreements in the Labor Registry Information Repository.